Who Needs a Copyright Small Claims Court? Evidence from the U.K.’s IP Enterprise Court (Guest Blog Post)
Amidst recent excitement surrounding the Music Modernization Act (which passed the House last month) and the CLASSICS Act (the subject of Senate Judiciary hearings last week), it would be easy for followers of US copyright law to lose track of yet another piece of important copyright-related legislation working its way through Congress: the Copyright Alternative in Small–Claims Enforcement, or CASE, Act.
This bill would create a “Copyright Claims Board” within the US Copyright Office (in effect, an administrative small-claims “court”) to hear copyright infringement complaints on an accelerated basis, with streamlined procedures, minimal discovery, and a $30,000 cap on recoverable damages. Though the bill was initially introduced back in 2016, it remains under active consideration today. Its primary sponsor, Rep. Hakeem Jefferies (D-NY), circulated a new discussion draft of the bill on Friday.
While some (including the US Copyright Office itself) hail the idea as a necessary step to protect small-time independent creators (who some say find it “almost impossible . . . to protect their livelihoods in court”), others have expressed concerns (summed up nicely in the recently–released report of the BCLT–Hastings workshop on this topic) that such a tribunal could be gamed to impose disproportionate cost or remedies on accused infringers.
In a new paper, we aim to bring data to bear on this debate by studying an IP small-claims court recently established London. Since 2012, English (and Welsh) copyright litigants have had the option to bring especially small claims in a “Small Claims Track” (SCT) established within the existing Intellectual Property Enterprise Court (IPEC). The IPEC-SCT (which can also be used to adjudicate trademark, design, and database claims) features a damages cap of £10,000, as well as a modest £260 cap on the attorney’s fees that the victorious party can recover from its opponent (a fact that makes the SCT more comparable to US courts than other UK venues that apply a more robust version of the “English Rule”). In addition to providing a set of procedural rules to which US proposals can be compared, the IPEC-SCT offers a history of case filings and outcomes that we can observe and analyze (something that, to our knowledge, has not been attempted to date) to better inform debates about adopting similar practices in the US.
We examine in the paper all cases filed in the SCT during the first 15 months of its existence. [FN1] While our findings on one hand tend to support the spirit behind the CASE Act, they also lead us to recommend against several of the bill’s specific provisions.
[FN1: For a prior research project, we received special permission to hand–collect data about all cases filed at the IPEC from 2007 through the end of 2013. For most of the IPEC’s history, case records were not made available to the public in any format, and even today comprehensive IPEC court records are available only to members of the public who visit the Rolls Building in London to inspect original copies in person.]
We find, relevant to the bill’s impetus, that copyright infringement was by far the most common type of claim adjudicated using the IPEC–SCT procedures (55 of 68 total cases), a fact that may indicate an especially great need for a small claims tribunal among copyright holders. In addition, we observe that most SCT copyright cases were filed by individuals and against businesses, and that most plaintiffs sought damages of less than £2,500 (one-fourth the statutory maximum) and very often settled for less than one-tenth of the damages amount claimed.
Our data also suggests that most copyright cases filed in the SCT would likely not have been brought but for the SCT’s existence. We find no evidence of a shift in cases from other courts to the SCT following its creation, and survey responses from UK legal practitioners (reported here) support this conclusion as well. In short, what we see suggests to us that the SCT is precisely the type of venue that US policymakers hope to establish with the CASE Act: a tribunal that serves the needs of especially small plaintiffs who sue to enforce rights in their own creations against defendants who have engaged in infringing acts that are particularly easy to prove, and in return seek modest recoveries that before would not have been rational to pursue in court.
Nonetheless, a number of important differences between US and UK legal practice make us skeptical that these results will translate across the Atlantic. For one, the US is both larger and more litigious than the UK. US courts see more than four times as many IP cases per capita, and the US population is about five times that of the UK. Both facts suggest a similar small claims tribunal in the US would attract a much higher caseload, which could in turn reduce the quality and consistency of adjudication. At present, the CASE Act calls for the appointment of just three “Officers” who will hear all cases sitting together as a single panel.
We note also that the CASE Act’s single, flat filing fee contrasts with that of the IPEC–SCT, which employs a multi–part schedule of fees that varies with the complexity of each case from as low as £60 to as much as £1,310. In addition to accommodating claimants with especially small claims, the SCT’s variable fee structure tends to dissuade claimants from leveraging litigation costs or inflated damages claims to induce outsized settlements or default judgments.
It is also noteworthy that the damages cap currently proposed in the CASE Act ($30,000) is significantly higher that the damages cap in effect in the IPEC-SCT. Even more importantly, the CASE Act would allow small claims plaintiffs to pursue statutory damages of up to $15,000 per registered work and $7,500 per unregistered work without presenting evidence of any actual loss. By contrast, UK copyright law requires claimants to prove actual damages in every case. Accordingly, it is quite possible that we observe no obvious abuse of the SCT system simply because gamesmanship is not profitable at current recovery levels. The proposed use of statutory damages in the US may, by contrast, invite additional gamesmanship by plaintiffs enforcing rights to works with little actual market value simply to leverage the possibility of five–figure statutory damages awards.
Overall, our analysis suggests that the US could implement a small claims court closely resembling the IPEC–SCT and reasonably expect to see similar results. However, the tribunal outlined in the CASE Act diverges from the IPEC-SCT in too many important respects for us to extend this conclusion to the current proposal. At a minimum, we recommend that policymakers prioritize two modifications to the CASE Act: first, the elimination of statutory damages and second, a reduction in the damages cap to the range of $10,000 to $15,000. We share the concern expressed in the BCLT–Hastings report that, as presently drafted, “the likelihood is strong that virtually every claimant will demand statutory damages in the maximum amount.” The result, we fear, will be a strong temptation for US copyright holders to uncover (if not indirectly induce) trivial infringement for purposes of pursuing a large statutory recovery. In addition, we encourage US policymakers to realistically assess whether a single panel of three Officers can adequately supervise a tribunal that may wind up with a caseload of several hundred claims per year. Policymakers should consider increasing the number and size of fees associated with the Board, both as a mechanism to raise funds and to deter unnecessary procedural complexity.